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  - May 13, 2008 -  

Procurement and Sourcing News: Do Your Procurement Managers Operate as “Innovation Scouts?”


German Plastics Manufacturer Rehau Uses Procurement Managers to Help Drive Innovation



SCDigest Editorial Staff

Schultz Says:
The effort has paid off not only for Audi, but also for Rehau, which has since had other customers and non-customers asking to “talk to us about how we can develop things with suppliers.

In the face of unprecedented levels of global competition and rapidly shrinking product lifecycles, companies are increasingly recognizing that the ability to consistently innovate is critical to corporate success and profitability.

German plastics manufacturer Rehau is one company that has refocused it entire company culture around being innovative – and enlisted procurement managers as front line soldiers in the strategy.

Rehau is a manufacturer of plastic products such as window frames, water pipes and car parts, and has built a global business of more than $2 billion euro. More recently, the company began to make actual finished goods, such as heating systems, as it basic product lines became commoditized by competitors from China.

As a result of the increased competition and entry into finished goods assembly, Rehau decided it also needed to rethink its overall business strategy – and focus much more heavily on innovation.

The New Role of “Innovation Scout”

Rehau’s strategy included engaging its procurement organization in the innovation effort.

According to Europe’s CPO Agenda magazine, 16 staff members in Rehau’s 140-person procurement organization now have the role of “innovation scouts” – helping the company identify promising new ideas.

The scouts have two main functions: (1) to have a “helicopter view” of the market and look at how good ideas, especially from suppliers, could be applied inside the company; and (2) to be a coordinator between the engineering staff and the procurement managers to help guide innovation projects through to completion.

It’s not a full-time position, but one that typically accounts for 20-30 percent of a person’s time over the course of a working year, according to the company.

The ideas aren’t meant to come just from suppliers. The innovation scouts also attend exhibitions, read trade publications, and perform research on the internet.

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Out of more than 1,000 suppliers of direct materials worldwide, Rehau classes about 50 as “know-how” suppliers – those that it views as true strategic partners. Another 200-plus are categorized as “development” suppliers.” These two groups of suppliers are regarded as the most likely sources of innovation and collaboration, and the prime focus of the innovation scouts.  Other suppliers are still encouraged to suggest ideas to the company.

“If we want our suppliers to give their newest products to us and not to our competition, and to be developing products together, we need a very close relationship with them,” says Rainer Schulz, the company’s chief operating officer.

Innovation in Action

The CPO Agenda article provides an example of the innovation scouts in action.

Rehau had secured a contract with Audi to supply a new high-tech bumper for its Q7 luxury vehicle.

As a Tier 1 supplier, Rehau’s role is to assemble the chrome, plastic, and other parts made by itself and several other firms, paint the bumper and deliver it to Audi’s factory on a just-in-time basis. The fact that there was only one heating solution on the market and it was expensive was not really Rehau’s concern, as Audi’s own buyers had negotiated the price and placed the order.

“In the past we would have just taken it,” said Schulz “But now it went over to the desk of the innovation scout who asked whether we could do it in a different and cheaper way.”

One of the company’s automotive buyers and scouts worked with an engineering colleague to design an alternative product and find a supplier to manufacture it. A little over a year later, the new system went live on the Q7, at half the previous price cost.

The effort has paid off not only for Audi, but also for Rehau, which has since had other customers and non-customers asking to “talk to us about how we can develop things with suppliers”, Schultz said.

What is your take on the concept of “innovation scout?” Should more companies adopt a similar approach in the procurement organization? What are the potential downfalls? Let us know your thoughts at the Feedback button below.

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